What’s coming in 2025?

As we reflect on 2024, it is clear that this year has been marked by significant political shifts and policy slowdowns. Under the Conservative government, legislative activity slowed significantly as the government focused on managing public perception ahead of the upcoming general election. Once Labour took office, they wasted no time in establishing their Cabinet; however, they were soon beset with a series of crises, including riots and the challenge of managing overcrowded prisons. The complexities of governance under the new administration proved more difficult than anticipated, leading to a slower than expected policy rollout in the first 100 days of the new government. While this initial period of transition was less eventful than hoped, legislative momentum has since picked up with select committees now fully formed and a number of key legislative proposals introduced.

However, despite these political challenges, certain regulatory and policy areas have continued to evolve throughout 2024, with significant developments expected in the coming year. Below, we look ahead to what 2025 is likely to bring for the insurance sector, including key regulatory changes, consultations, and potential reforms.

Key Areas of Focus in 2024 for the Market Affairs Team

Discount Rate

The long-awaited changes to the Personal Injury Discount Rate (PIDR) remain a key focus for the industry. In 2024, while we saw the announcement of new rates for Scotland and Northern Ireland (both positive 0.5%), the decision for the new rate in England and Wales has yet to be revealed. This decision, which is due by 11 January 2025, is critical for insurers who are preparing for changes to claim settlements. While the intention is not to necessarily set the same rate for all the jurisdictions (there are some clear differences in the methodology in England and Wales compared to the other jurisdictions), the intention was to review them at a similar time. The expectation is that the rate for England and Wales will be announced any day now.

Parliamentary Engagement

Despite the shifting political landscape, our engagement with Parliamentarians has remained strong throughout the year. Keoghs has hosted and participated in a series of high-level events, including parliamentary dinners, round-table discussions, and one-on-one meetings with key MPs and ministers. Notable events include a mediation round table attended by Sir Bob Neill, the former Chair of the Justice Committee, and a fraud-focused round table that featured two government ministers: Lord Hanson and Georgia Gould MP. These events have helped us to stay at the forefront of key policy discussions and ensure that the concerns of the insurance sector are represented. We expect to continue these efforts in 2025, engaging with both MPs and government officials on issues such as fraud, young driver safety and mandatory mediation.

What’s Coming in 2025 and Beyond?

As we enter 2025, the insurance sector can expect a range of important regulatory and legislative changes. Below is a detailed breakdown of what to expect, broken down by key areas.

Civil Justice (generally)

• Civil Liability Act (CLA) Cost Saving Report: Under the Civil Liability Act, insurers were required to report their cost savings to the FCA, with the government due to report to Parliament by April 2025.
• CLA Post-Implementation Review: The Ministry of Justice (MOJ) has confirmed that it will commence the next CLA post-implementation review in 2025, likely in the first half of the year. This review will evaluate the effectiveness of the CLA.
• Court Track Limits Review: There is the potential for the MOJ to link the anticipated court track limits review, including the Small Claims Track (SCT) limit, to the broader CLA review. If this happens, there could be significant changes to the track thresholds.
• Pre-Action Protocol (PAP) Reform: The Civil Justice Council (CJC) has previously recommended the introduction of a General PAP to replace the current Practice Direction for Pre-Action Conduct. Work on this reform is expected to move forward in 2025, streamlining and modernising pre-action conduct in civil claims.

Complex Injury

• National Living Wage Increase (April 2025): The planned increase to the National Living Wage in April 2025 will have an immediate impact on care costs, particularly for insurers dealing with complex injury claims. According to the Annual Survey of Hours and Earnings (ASHE), a third of care workers are currently paid below the national living wage, so an increase is expected to significantly push up hourly rates for care workers.
• Fair Work Agency Consultation: The Fair Work Agency is set to be established under the Employment Rights Bill, and consultations regarding this agency are expected to begin in 2025. The agency will likely recommend higher hourly rates for care workers, further increasing the cost of care-related claims in the insurance sector.

Abuse Claims

Limitation Law Reform: Following the closure of a consultation on reforming the law of limitation under the Conservative government, Labour is expected to consider policy reform in this area in 2025.

Mediation

• Extension of Mandatory Mediation: In 2024, mandatory mediation was rolled out for low-value claims not involving personal injury. This move is expected to gain further traction in 2025, with ministers likely turning their attention to extending mandatory mediation to other types of claims. However, discussions have yet to formally commence.

Employment Law

• Employment Rights Bill: The Employment Rights Bill, which was introduced to Parliament in October 2024, is expected to receive Royal Assent in April/May 2025. The full implementation of its reforms is expected to take place in autumn 2026.
• Probationary Periods Consultation: A consultation on statutory probation periods and fair dismissal processes during probationary periods is set to commence in the first half of 2025.

Motor

• Whiplash Tariff Report: The much-anticipated Whiplash Tariff review report was published on 21 November and introduces a 14-15% uplift to the current Tariff. Requiring additional consultation with the Lady Chief Justice which is anticipated to take approximately 8 weeks, an affirmative SI process will commence at the start of 2025 to formally introduce these reforms.
• MedCo Consultation Response: The MedCo Consultation Response, which has been long overdue, is expected shortly. This will address various issues, including proposed increases to the cost limits for medical reports.
• Premium Finance Market Review: The Premium Finance Market Review is underway, with terms of reference currently under consideration. While the exact timeline is unconfirmed, this review is expected to conclude by the end of 2025.
• Motor Insurance Taskforce: Announced in October 2024, the Motor Insurance Taskforce will begin its work in January 2025, with findings due in Q2 of 2026. The task force will examine issues such as fraud, claims inflation, and market dynamics in motor insurance.
• E-scooter Regulation: The Department for Transport (DfT) has confirmed that private e-scooter regulation is not on the agenda for 2025. With public trials extended until May 2026, there will be no significant regulatory changes in the private e-scooter space this year.

Credit Hire

• Ali v. HSF Logistics: The Court of Appeal heard the case of Ali vs. HSF Logistics on 17 October 2024, with the judgment expected to be handed down in either late 2024 or early Q1 2025. This case will address the issue of illegality in credit hire claims, specifically whether a claimant’s illegal use of their vehicle (e.g. driving without a valid MOT) invalidates the entire hire claim.
• Non-party costs orders: Another case that we understand is heading to the Court of Appeal in 2025, is a leapfrogged appeal on the issue of non-party costs orders. This is likely to be eagerly anticipated as the first case on the issue to reach the Court of Appeal since Farrell v Direct Accident Management Limited in 2009, potentially giving definitive guidance as to whether it is appropriate for costs orders to be made against CHOs directly where the claim brought in the name of the hirer fails.

Property

• Planning and Infrastructure Bill: Following a consultation that closed in September 2024, a government response is expected by the end of 2024 with the Planning and Infrastructure Bill expected to be introduced thereafter in early 2025.

Leasehold and Commonhold Reform Bill: A Draft Leasehold and Commonhold Reform Bill is expected in 2025.
Renter’s Rights Bill: The Renter’s Rights Bill, currently at Committee Stage, is expected to receive Royal Assent by April/May 2025.
Lithium-Ion Battery Legislation: The Product Regulation and Metrology Bill will address issues surrounding lithium-ion battery safety and is expected to achieve Royal Assent in May 2025. As a result, the Private Member’s Bill on this topic is expected to fall away entirely.
Property (Digital Assets etc) Bill: The Property (Digital Assets etc) Bill is at Second Reading, and is expected to receive Royal Assent by Q3 2025.

Costs

• RTA and EL/PL protocol costs as well as Fixed Recoverable Costs will be uprated for inflation based on SPPI in January 2025.
• Guideline Hourly Rates: The expectation is that these will also be uprated in line with SPPI in January 2025.
• Clinical Negligence Fixed Costs: The Clinical Negligence Fixed Costs scheme for lower-value claims was expected to come into effect in April 2025. However, we have recently been informed that the reforms have been put on hold, awaiting review by the Department of Health. We are waiting to hear if the reforms may be rolled out in autumn 2025 or put on hold indefinitely.
• CPRC Stocktake of Fixed Recoverable Costs (FRC): A stocktake of FRC was due to begin in February 2025, though there are concerns in the industry about whether there has been enough time to assess the full impact of previous FRC reforms and anticipation that this will not take place until later in 2025.
• Cost Budgeting Reform: The CJC’s 2022 report recommended several reforms to cost budgeting, including the potential for a ‘cost budgeting light’ system. Progress on these reforms is expected to continue throughout 2025.

Conclusion

The insurance sector faces a year of significant change in 2025, with a range of regulatory and legislative updates across multiple areas. From the ongoing evolution of the Civil Liability Act to potential shifts in motor insurance regulation and employment law, insurers will need to stay agile and prepared to respond to these changes. At Keoghs, we remain committed to supporting our clients through these challenges, ensuring that they are well-prepared for the evolving regulatory landscape.

If you would like to know more about how Keoghs can help your business navigate the changes coming in 2025, please get in touch.